Our Top 50 ETFs list is now in its 12th year and continues to serve the same purpose as it did at the start, highlighting the exchange traded funds (ETFs) we view as the most useful low-cost building blocks for a portfolio.
We seek funds that track the most appropriate index for an especially competitive price and ensure good liquidity (and low trading costs) for their investors.
The fortunes of stockpickers can easily wax and wane over time, but tracker funds (if not the markets they track) offer a greater level of continuity. This list is therefore pretty stable. In 2025 we have switched out six names, one fewer than in 2024.
Unusually, most of these changes have occurred among our selection of Core ETFs. That reflects the fact that a price war continues to wage here, with providers making fee cuts on their US and global equity trackers in an attempt to drum up business.
Our response has been to swap some core holdings for cheaper options. A cheaper sterling-hedged S&P 500 ETF enters the list, as do a global tracker and its hedged share class.
Price wars tend to happen when a competitor tries to grab market share from a rival with lots of assets, and this often leaves investors with an interesting dilemma. They can choose to back the smaller fund with a lower headline fee, but in doing so risk having to pay more in other costs due to wider trading spreads.
In the case of our hedged S&P 500 ETF choice this year, recent figures suggest there is no difference in trading spread between the new entrant and our 2024 preference, making a switch based on headline price pretty straightforward.
The two UBS MSCI World options in our latest list do come with higher trading spreads than the 2024 selections, however. We have nevertheless included them to showcase the lower headline fees, and because ETFs that undercut their rivals on headline charges tend to see a subsequent surge in assets, something that should lower spreads over time.
Of our other changes, we have dropped a couple of funds – one in the bond space and one in global income – to make room for other options. One new entrant arrives on the back of continued concerns about the MSCI World index being US-heavy, while another focuses on a compelling (if macabre) theme that has generated strong returns in recent history.
On the whole, we remain content with the current selection, from the Core options to the more specialist funds, not least because the list covers the main investment regions and plenty of interesting specialisms.
It’s also worth noting that we have resisted the calls of some of our expert panellists to include active ETFs in the list. Active funds in an ETF wrapper have become a big deal in the US, in part because of the tax advantages associated with ETFs there, and are now spreading to Europe.
We don’t deny that some of these funds may well have merit, but we prefer to use this list to focus on passives. Our Top 50 Funds list, published each September, looks at the best active options available.
Methodology
We look for those ETFs that provide the best form of exposure to a given market, that are competitively priced and that offer good liquidity. The latter two metrics often lead us to back bigger ETFs, something that explains market leader iShares’ imposing presence in the list.
When we assess the relative cheapness of a product, we focus on headline fund costs. However, other fees such as platform costs can also make a big difference to your returns and are worth monitoring.
Our experts below make an invaluable contribution by reviewing the list and offering suggestions about both its constituents and structure.
What remains
Long-standing fans of the list will see plenty of continuity here.
The broad structure remains the same: our Core names provide cheap, liquid exposure to mainstream markets such as the S&P 500 and the FTSE 100.
Satellite funds target an area or theme that is absent or under-represented in the Core list, with the options ranging from small-cap portfolios to income ETFs and dedicated exposure to more niche markets, such as India.
The Niche category goes even more specialist: think commodity funds and portfolios that seek to track a specific investment theme. Some investors may well see these as core holdings, especially when geopolitical turmoil has sent the gold price soaring, for example. But these are still options that play a lesser role in portfolios and won’t appeal to all investors.
The list is mainly focused on equity funds, and on Core and Satellite options.
We generally favour accumulation share classes, bar when we highlight funds (such as dividend ETFs) that specifically seek to generate income.
A distribution or income share class will pay out any dividends generated, while the accumulation option will see those dividends reinvested – a difference that can have a substantial effect on long-term total returns.
But in some cases, as with funds that hedge your currency exposure back to sterling, a distribution share class can end up being the only option available.
All the names in our list are Ucits funds readily available to European investors, although, as is our standard practice, we have removed this label from funds’ names for the sake of brevity.
Our preferences
While the likes of an S&P 500 tracker tend to be straightforward, ETFs usually follow differing methodologies when it comes to more specialist areas. So making a choice here involves favouring a given strategy, and we have stuck with a couple of options on this front.
When looking at ESG funds in the Core category, we favour names that use MSCI’s SRI indices, which are more stringent than some other options and back the best 25 per cent of companies in a sector as judged by certain metrics. They do, however, still include sectors that some ESG aficionados might wish to avoid, such as banks.
For income, we continue to favour dividend ETFs with a focus on more sustainable payouts, meaning our options have tended to look pedestrian compared with riskier options that concentrate more on chasing yield.
For example, the iShares UK Dividend ETF (IUKD) exited the list in 2020, but has notably outpaced the more conservative SPDR S&P UK Dividend Aristocrats ETF (UKDV), in part because of its exposure to energy majors.
As mentioned, the list includes a handful of thematic funds, including one new addition this year, for those interested in this area. But we still maintain a pretty sceptical view of such products, given the difficulty of successfully capturing the benefits of a given ‘theme’ within a single portfolio.
Finally, here come the caveats. Our selections should be a starting point for your own research, and if we have dropped an ETF it doesn’t necessarily mean you should sell or shun it. We also make no promise that the funds in the list will top the performance charts in the future.
Instead, we seek to highlight essential funds that can lay the foundations for a well-diversified portfolio, as well as more targeted options for specific circumstances and preferences.